F-tech Inc. Business Report FY2012

Business Highlights

Financial Overview

(in millions of JPY)

FY ended Mar. 31, 2012

FY ended Mar. 31, 2011

Rate of Change (%)

Factors

Sales

130,609

137,706

(5.2)

-Performance in all areas was significantly lower year-on-year due to the impact that the Great East Japan Earthquake, the flooding in Thailand, and negative currency translation had on the Company's business.

Operating income

4,712

7,832

(39.8)

Ordinary income

4,342

7,362

(41.0)

Net income

1,657

3,050

(45.7)

Performance by Region

<Japan>-As a result of a recovery in Japan at the end of the fiscal year, there was an increase in new-vehicles produced by its customers, driven by the reintroduction of tax and sales incentives for eco-cars. The increase, however, was not enough to offset the larger negative impact that had already taken a toll on business, caused by the Great East Japan Earthquake, the flooding in Thailand, the decrease in production volumes at its major customers, and a higher fixed-cost operating expense ratio due to operating business at lower capacity. As a result, performance fell year-on-year. Operating revenue was 41,941 million yen, a 7.8% year-on-year decrease. Operating profit, which dramatically fell, was 105 million yen, a 91.3% year-on-year decrease.

<North America>-Business recovered after having been severely impacted by the fall in production volumes at its major customers because of the Great East Japan Earthquake and the flooding in Thailand. In fact, production volumes returned to normal levels by the end of the fiscal year. However, due to negative currency translation, operating revenue fell by 3.0% year-on-year to 61,730 million yen, and operating profit fell 19.0% year-on-year to 3,084 million yen.

<Asia>-Production volumes at its major customers were lower because of the impact on operations caused by the Great East Japan Earthquake and the flooding in Thailand. As a result of negative currency translation also, operating revenue fell by 5.5% year-on-year to 26,937 million yen, and operating profit fell 42.5% year-on-year to 1,665 million yen.

Contracts

-The Company began producing products for Honda's new "Fit Shuttle", "N-Box", and "CR-V".-The Company won an order from GM for sub-frames and suspension arms, which are to be delivered to the OEM's operations worldwide.

New Company

<China>-The Company is planning to locate an R&D subsidiary in Guangzhou in December, its first development base in China to engineer technologies for the Chinese automotive market. The aim of the establishment is to respond to increased requirements made by local car manufacturers to receive technical assistance from Japanese parts suppliers. Many requests have been made by Chinese companies, which have no affiliation with any particular group, while aiming to improve their product quality and technologies. The addition of the local development office is expected to open up the company's business opportunities in the country by meeting such requests, including joint development of structural parts in the chassis systems, which are the company's expertise. The Guangzhou facility will initially have 16 engineers, adding 10 people each year to ensure the workforce of 50 to 60 over the next 4 to 5 years. F-Tech is willing to increase the headcount further if necessary. The new facility will be established at the Guangzhou High-Tech Industrial Development Zone on December 1, 2011 with a capital of approximately 200 million yen. The project is subject to an approval by the Chinese authorities. (From an article in the Nikkan Jidosha Shimbun on November 10, 2011)

Awards

-For two years in a row, the Company won the Quality Award and Environmental Award from Honda. -The Company's subsidiary, F&P America Mfg., Inc., won an Quality Award and Excellence in Delivery Award from Honda De Mexico S.A. De C.V.

R&D

R&D Expenditure

By region: Japan (1,175 million yen), North America (567 million yen), and Asia (96 million yen).

R&D Structure

-Haga Technical Center is in charge of product design and development, research on materials and product performance tests.

-The Haga Technical Center is in charge of product design and development, as well as research on materials and product performance tests.

-The Haga Technical Center was so severely damaged by the Great East Japan Earthquake that R&D activities could not be sustained for a while. However, the damaged facility was once again restored and now serves again as a research center. A new hydro-forming technology, which is one of the core areas of expertise of the Company, was developed as the first R&D achievement at the facility, with the Company deciding to apply it to produce new products, as it works to strengthen its future technologies.

R&D Achievements

-The Company continued winning orders for new business to supply sub-frames that are lighter, have higher performance, and cost less, for Honda's new "Fit Shuttle", "N-Box", and "CR-V".-As a result of GM's high appraisal of the Company's technology capable of making lighter weight products, the Company won an order for sub-frames and suspension arms for delivery to the OEM's operations worldwide.

Technology licensing-out Agreement

(As of Mar. 31, 2012)

Partners

Country

Type of Support

Contract Period

Cheng Yu Industry Co., Ltd.

Taiwan

Technical support dealing with manufacturing and sales

Dec. 21, 1994-Dec. 20, 1999Yearly automatic renewal from then on

Tallent Automotive Ltd.

UK

Technical support dealing with manufacturing and sales

Jun. 7, 1996- Jun. 6, 2009Yearly automatic renewal from then on

Progressive Tools & Components (P) Ltd.

India

Technical support dealing with manufacturing and sales

Nov. 29, 1996- now under way

YPS Limited

Turkey

Technical support dealing with manufacturing and sales

Apr. 1, 2000-Mar. 31, 2005Annual automatic renewal from then on

SMC Co. Ltd.

South Korea

Technical support dealing with manufacturing and sales

Apr. 4, 2006-Apr. 3, 2011(Annual automatic renewal from then on)

Cosma do brasil

Brasil

Technical support dealing with manufacturing and sales

Sep. 27, 2005-Sep. 26, 2012Will continue indefinitely until production of the product subject to receiving the technical support ceases.

Coskunoz A.S.

Turkey

Technical support dealing with manufacturing and sales

Nov. 1, 2007-Oct. 31, 2012 Will continue indefinitely until production of the product subject to receiving the technical support ceases.

Formex Mexico, S.A. de C.V.

Mexico

Technical support dealing with manufacturing and sales

Aug. 30, 2010-Aug. 29, 2015 Will continue indefinitely until production of the product subject to receiving the technical support ceases.

Technology licensing-in Agreement

(As of Mar. 31, 2012)

Partners

Country

Company name

Type of support

Details

Contract period

F-TechF&P Mfg Inc.F&P America Mfg Inc.

UK

TI Corporate Services Limited (Variform, Inc.)

Automotive components

Technological support dealing with pipe forming

Oct. 20, 1994-Oct. 20, 2023

Investment Activities

Investment Expenditure

(in millions of JPY)

FY ended Mar. 31, 2012

FY ended Mar. 31, 2011

FY ended Mar. 31, 2010

Investment Expenditure

7,873

5,095

3,177

By region: Japan (1,874 million yen), North America (4,514 million yen), and Asia (2,036 million yen) (Adjusted amount 551 million yen)